Bank Trade Associations Pen Letter on Credit Union Overreach

In a joint letter to congressional leadership, the American Bankers Association and the Independent Community Bankers of America took issue with NCUA’s proposal to loosen its field of membership restrictions. It is believed that the proposed expansion would effectively allow credit unions to operate as tax-exempt banks and have significant, wide-reaching policy implications.


“Radical expansion of credit unions poses a major threat to the viability of taxpaying community banks from coast to coast, while adding to the federal deficit in lost tax revenue,” the letter said. “We urge Congress to aggressively exercise its oversight function and reorient this out-of-control agency.”

Under the NCUA proposal, credit unions would be able to serve “local” and “well-defined” areas that stretch the definition of both terms beyond reason -- including labeling whole states as local areas in some cases -- and open the door for credit unions to redline underserved urban cores in favor of wealthy suburbs.

“These quasi-legislative actions are being pursued by unelected bureaucrats because, in the words of NCUA’s vice chairman, ‘Congress is deadlocked’ on these issues,” the bank trade groups said. “NCUA is stealing the province of the legislature, in full view and without apology.”

Congress established credit unions in the 1930s to provide small-dollar loans to close-knit groups of people of modest means. To encourage credit unions in their mission, Congress exempted credit unions from federal income taxes. However, many of today’s credit unions bear little resemblance to the industry that received this special tax exemption and today have become indistinguishable from the banking industry, leveraging their taxpayer subsidy to aggressively grow.

In 2014, $0 was paid in taxes by credit unions in Nevada, while banks in Nevada paid a total of $640,490,000 in all applicable federal, state and local and foreign income taxes.

Credit unions appear to no longer be serving their mission of assisting disadvantaged members of the community. For example on mortgages originated by credit unions, only 1% were to lower income families, while 45% were written for upper income families.

The banking industry has a long history of fighting this unjustified tax exemption and membership creep. The goal is simply to level the playing field: have large, aggressive credit unions return to their original mission or have them become subject to the same regulatory, supervisory and tax requirements as banks.

The ICBA and the ABA have resources for banks to submit feedback. The deadline is February 8, 2016.

Click to visit the ABA or the ICBA reources for letter writing.